The Dividend Cafe - The DC Today - Thursday, October 5, 2023

Episode Date: October 5, 2023

Today's Post - https://bahnsen.co/3F8Luji More or less, there is one market movement right now, even if it has three parts. Bond yields and the dollar are in the same direction; stocks are in the opposite direction. Those three in those respective relationships are all part of one story, not three different stories. In a nutshell, I remain convinced that the story has become one of quantitative tightening. The Fed is a seller (sort of) of Treasuries, not a buyer (meaning they are not rolling over matured bonds). Global central banks are buying less to support their own currencies. And that leaves individuals and economic buyers who buy at good yields but not lower yields. On Capitol Hill, the race for the new speaker is setting up to be a real circus. I know, you are shocked. Gasoline is down over -20% in the last three weeks! Mary Daly of the San Francisco Fed said in a speech today that, wait for it, holding rates where they are is also restrictive monetary policy! Hmmmm, you don’t say. Other than that, it was an uneventful day, and the intra-day swing was only -225 points (the chart visually looks more violent) – all in a flat day. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Welcome to the DC Today, your daily market synopsis of the Dividend Cafe, brought to you every Monday through Thursday to bring you up-to-date information and perspective on financial markets. Well, hello and welcome to the Thursday edition of the DC Today. It has been an odd day in markets in the sense that it looks really boring. The Dow was dead flat. I think it was down 10 points. The S&P was down 12 basis points, not much. NASDAQ down 13 basis points. The 10-year bond yield was dead flat, which is really why stocks were flat. Actually, I think it was down one basis point, which pushed bonds up a tiny, tiny bit. Oil was down another one and a something percent. The Dow intraday was down 225 points, but the chart looked real bad. It had dropped a lot and came all the way back. But,

you know, with the kind of volatility we've been having, 225 is still not much. Consumer staples were almost all of the downside. Real estate was the biggest gainer today. It feels like we're near a washout of capitulation in some of the consumer staples. We were in the market actively today on that front. So you do have just kind of a very similar story. It's getting to be a broken record. It's going to stay. So I don't mind just repeating it every day, but I beg your pardon if it's annoying.

I don't mind just repeating it every day, but I beg your pardon if it's annoying. The dollar, bond yields, and then inversely stocks. Those are three different things, but it's really all one thing. Right now, bond yields up, dollar up, stocks down is one monolithic experience, or bond yields down, dollar down, stocks up. That's pretty much where we are. There's not going to be a lot of daylight for a little while, in my opinion, between the dollar and bond yields and between dollar bond yields and the inverse movement of equities. And when that changes, it will change. And when it changes, it will change probably quickly and probably dramatically if history is any guide. But timing that change is very difficult.

That's the state of markets right now. Mary Daly, San Francisco Fed head today, gave a speech and basically said, hey, even though we don't raise rates anymore, you know, just by staying higher, that's a form of tightening. Which I appreciated her reading straight out of the D.C. today. But, yes, I think that you're going to hear more central bankers sharing that obvious takeaway in the months ahead, which I think is where they'll be. And that we'll get out of the debate of a 20 to 40 percent chance of additional rate hike and other governors continuing to say we might need one or two more hikes, I think that what you'll end up seeing is that the conversation will move to how long they'll be high. That will become the new tightening controversy. We're more or less there now, but I think that's going to be

the total conversation without the continued overhang about additional rate hikes. That'd be my take as we get ready to proceed through Q4 and go in a couple of months out into Q1 of next year. There's an ask, David, there were a couple of data points also covered in the DCtoday.com. I can do them real quickly now. The trade deficit did come in a little bit lower than expected last month. I don't ever care about the difference between imports and exports. I care about the totality of imports and exports. Total trade was up a little from last month, but it's still down about 3.4% versus a year ago. Total trade is a much better economic indicator than the delta between imports and exports. In our case, of course,

we generally import more than we export, hence the definition of a trade deficit. That's all I got. I'm excited for Dividend Cafe tomorrow. I'll leave you in suspense about the topic. I've started to kind of formulate my thoughts on it, but it isn't written yet. And yet I have a kind of a good idea where I want to go with it. Heavy stuff going on, lots on our mind, but you have plenty on your mind too.

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